KAB: jeonse, apartment price growth will slow

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KAB: jeonse, apartment price growth will slow

Apartment prices as well as prices of jeonse, or lump-sum deposit rent contracts, will likely continue to rise in the second half of the year, according to a projection by the Korea Appraisal Board (KAB), though the pace of increase is likely to cool down.

The KAB on Wednesday projected that prices of apartments on sale in the second half will rise 0.3 percent from the first half, while jeonse prices will increase by 0.5 percent. The growth projection for the second half is 0.2 percentage points higher than in the first six months of this year.

However, based on a year-to-year comparison, the apartment price increase is expected to be 0.4 percent, a sharp drop compared to the 3.5 percent annual growth enjoyed last year.

The situation for jeonse prices is worse. The expected year-on-year increase for the second half is 0.2 percentage points lower than the year-on-year increase in the first half.

The KAB said apartment prices will continue to grow in the second half, as more people switch from jeonse contracts to purchasing their own homes because jeonse prices have risen so sharply that they have come close to the value of apartments on sale.

Even though jeonse prices are expected to continue going up, the pace will especially slow down because of the massive supply of apartments flooding the market.

Between August and October, an estimated 80,000 new units will be available on the market. The areas most likely to be affected are Gyeonggi, South Chungcheong, Daegu and Gwangju.

However, the housing market could still miss these projections, as uncertainties about the economy grow. The government’s tighter grip on lending loans is another negative factor that could curb the housing market.

In fact, the KAB said housing transactions have been shrinking throughout the first half. Compared to a year ago, the number of apartment sales has dropped 25 percent. The KAB expects this trend to continue in the second half, projecting the number of apartment transactions to drop 23 percent year on year to 908,000 units.

“Since the end of last year, housing prices have been falling, and the reason the overall number of apartments traded in the first half dropped sharply is because last year, such transactions hit an all-time record,” said Chae Mi-ok, head of the KAB’s real estate research institute. “Such a trend will likely continue in the second half.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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